What is a Proforma Invoice and How to Prepare It?

Because the word "invoice" is in its name, a proforma invoice is often misunderstood. It is not actually an invoice; it is an official-looking quote.

It does not create accounting records, does not generate VAT, and cannot be written off as an expense. Despite this, it is indispensable in exports and corporate sales.

What is it used for?

A proforma is the documented way of saying to the buyer, "I will do this job under these conditions and at this price." It is useful in three scenarios:

Before payment. In prepaid transactions, the buyer requests a document to make the wire transfer. Since the goods have not been delivered yet, an invoice cannot be issued; the proforma fills this gap.

In exports. The buyer abroad requests a proforma for import permits, opening a letter of credit, or their own customs procedures.

In corporate approval processes. In large companies, purchasing approval depends on a document displaying an amount. The proforma initiates this approval.

What should it include?

There is no mandatory format, but an incomplete proforma leads to disputes later on. It should include the following:

Document title. It should clearly state "Proforma Invoice" and indicate that it has no financial value. Otherwise, the buyer might mistake it for a real invoice and record it in their books.

Parties and date. Seller and buyer information, issue date, and document number.

Line items. Product/service description, quantity, unit price, currency, and total.

Validity period. The most commonly skipped field. Giving an indefinite quote during a period of fluctuating exchange rates and costs means selling at a loss three months later.

Payment and delivery terms. Due date, payment method, place of delivery. In exports, also delivery terms (Incoterms) and origin information.

Transitioning from proforma to invoice

When the buyer accepts and delivery takes place, the actual invoice is issued. The most common mistake here is manually retyping the information from the proforma into the invoice: an item is skipped, a price changes, or the total doesn't match.

The correct workflow is to keep the proforma where you prepared it and convert it into an invoice. This way, the line items, prices, and customer details are carried over exactly; the only thing that changes is the document type.

There is an additional consideration for foreign currency proformas: the exchange rate on the invoice date and the collection date can be different. We explained how this difference is documented in the exchange rate difference invoice article.

Does appearance matter?

A proforma is often the first written document your customer receives from your business. The difference between a broken table in Word and a neat PDF with your logo directly impacts the perception of professionalism.

We covered making document outputs suitable for your brand in the customizing print templates article.

Instead of manually typing your standard notes (bank details, validity period, return policy) on every document, you can bind them to a template; the description templates article explains this.

Frequently asked questions

Can I receive payment with a proforma invoice?

Yes, the buyer can make a payment based on the proforma. However, you must issue the actual invoice after collection; the proforma does not replace it.

Should I show VAT on the proforma?

For domestic sales, showing it allows the buyer to see the total cost. In exports, it is issued without VAT.

Does the proforma number use the same series as the invoice number?

No, keep them separate. Confusing it with the official invoice series makes tracking difficult.

Can the buyer write off the proforma as an expense?

No. A proforma is not a financial document; an actual invoice is required for expense recording.

A proforma is the very first step of a sale. When prepared properly, it facilitates both your chances of closing the deal and your subsequent invoicing process.

You can open a free account on Qolay.App and manage your document processes from a single place.